LAUSANNE, SWITZERLAND — While trade fosters prosperity and peace, trade barriers heighten the risk of economic weakness and major political and social upheaval, said David W. MacLennan, chief executive officer of Cargill.
Speaking March 28 at the Financial Times Global Commodities Summit, Mr. MacLennan advocated against “me-first” trade stances. The summit was held at the Beau Rivage Palace in Lausanne.
“Severe economic conditions — combined with other social and political factors — can also push governments to the edge and, in worst cases, spark civil unrest,” Mr. MacLennan warned. “Poverty and conflict all too often force people to leave countries they love in search of a better life for themselves and their children.”
Such a dire picture of the potential consequences of aggressively protectionist trade actions is anything but hypothetical, Mr. MacLennan said. He described a chain of events that resulted from a 2010 heat wave in Russia that reduced that country’s wheat production by a third. In response, Russia instituted a wheat ban that triggered a dramatic escalation in global wheat prices.
“A 2% change in global wheat supply drove nearly a 60% increase in prices around the world,” Mr. MacLennan said. “At the time, Russia supplied Egypt with the majority of its wheat. The rapid shift in supply led to price increases, and when combined with broader political tensions, was one of the contributing factors to the 2011 protests in Tahrir Square.”
He said similar scenarios played out in 60 different nations around the world over the last decade, contributing to varying levels of social and political instability.
Noting that many nations recently have been “leaning further toward economic nationalism,” Mr. MacLennan described a domino effect of economic actions and retaliatory moves that threaten to leave world trade “tied in knots.”
Advocating for support of the World Trade Organization, and a rules-based trading system, Mr. MacLennan offered a dystopian view of what could transpire if the “me-first” approach to trade continues to build.
“Imagine critical commodities — oil, food, metals and manufactured goods — used as bargaining chips at every turn,” he said. “Imagine a world where technology and ideas cannot cross borders. It’s a world none of us wants to see, but is foreshadowed by recent meetings of the G20.”
While warning of the threats posed by a global tilt toward protectionism, Mr. MacLennan devoted most of his presentation to offering a vigorous defense of world trade, describing what Cargill is doing to advocate for free trade and encouraging his audience to defend free trade.
The scope of world trade, which provides nations access to commodities, services and capital, is colossal and growing, Mr. MacLennan said. He noted global trade jumped more than 150% between 2000 and 2014, rising to $12.2 trillion from $4.8 trillion. In the United States alone, where Cargill is based, one third of U.S. farmland is planted for exports.
Acknowledging that “trade is imperfect and that its benefits are not always evenly distributed,” Mr. MacLennan said trade often is scapegoated for other economic dislocations. For instance, he noted that 88% of U.S. manufacturing job losses over the past decade were caused by increased productivity associated with information technology, robotics and organization.
“That’s a harsh reality to face for workers and their families,” he said. Still, due to economic growth, manufacturing jobs in the United States are growing.
“It’s estimated that nearly three and a half million manufacturing jobs will be needed, and two million are expected to go unfilled due to a widening skills gap,” Mr. MacLennan said. “The challenge is that the jobs of today will not be the jobs of tomorrow. That has been consistent throughout history. We need to immediately address this skills gap.”
Mr. MacLennan said companies like Cargill should make investments in its future workforce, but public policy and education systems “need to keep pace,” too.
As an example, Mr. MacLennan described a plant converted by Cargill from a beef processing facility to a cooked meat plant. A $100 million initiative prompted by changing consumer demand, the project required Cargill to retrain plant employees for “jobs that will be vital over the long term,” he said.
“Retooling and retraining isn’t easy,” he continued. “But as our societies move into the Fourth Industrial Revolution, we need to address skills gaps to keep our businesses and economies strong.”
Returning to the idea that trade is scapegoated for hardships around the world, Mr. MacLennan said trade becomes a “convenient excuse,” in part because of distortions perpetuated both by defenders and detractors of trade.
“Pro-trade factions tend to overpromise the benefits of trade, while those who advocate trade restrictions often blame trade policies for a variety of unrelated societal impacts,” Mr. MacLennan said. “The true nature of trade’s impact lies somewhere in between.”
To combat these misperceptions, Mr. MacLennan said political leaders must understand that:
- “Trade is a net job creator.
- “Today, more than half of the U.S. manufacturing workforce depends on exports.
- “And that nearly half of all exports of U.S.-manufactured goods are sold to the 20 countries that have eliminated barriers through free trade agreements.”
Citing U.S.-China trade as an example, Mr. MacLennan noted that as per capita consumption of U.S. beef has declined, imports from China have risen, sustaining total demand. China also has been a growing importer of soy products.
“All of this makes sense through the lens of comparative economics,” he said. “But we tend to forget that it is not just about economics, it’s also about sustainability. Farmers in China don't have the same access to land and water that we have in the United States.”
Beyond making sure policy makers are better informed, Mr. MacLennan said the public at large needs to better understand the realities of trade.
“That means working to restore public confidence in what trade actually can accomplish — and clearly dispelling any unrealistic expectations that erode that confidence,” he said.
Such information efforts need to be accompanied by policies that effectively help workers and families adversely affected by trade.
“According to the International Institute of Economics, the United States has gained $1 trillion from globalization versus roughly $50 billion in adjustment losses,” Mr. MacLennan said. “We should be thinking of how this 20-to-1 benefit/cost ratio could be used to create a new workforce paradigm — one that takes into account the constant change and disruption that will come from technology, automation and innovation.”
For its part, Cargill will advocate for comprehensive trade agreements such as NAFTA, T.P.P. and others, Mr. MacLennan said. He noted 1 in every 10 acres on U.S. farms is planted to products exported to Canada and Mexico. He noted that the food and agriculture sector supports 17 million full- and part-time jobs in the United States.
Mr. MacLennan concluded by advocating for “a new workforce paradigm.”
“The public and private sectors need to invest in educating this generation of workers and the next,” he said. “We need to invest in lifelong learning for all our workers in order to adapt to the constant pace of change. We need to start early and strengthen education in important disciplines such as Science, Technology, Engineering and Math — the STEM disciplines.”
He said Cargill was investing $13 million in STEM programs this year and also in programs for students in fields of agriculture and food.
“Let’s collectively stand up for trade,” he said. “Let’s stay globally connected and resist the currents of protectionism. Let’s address the gaps and take tangible steps to build a more profitable, peaceful and connected world.”
